Retail Movers: Lululemon Athletica inc. and Francesca's Holdings Corp

Retail stocks Lululemon Athletica inc. (NASDAQ:LULU) and Francesca's Holdings Corp (NASDAQ:FRAN) are headed in different directions

Jan 9, 2017 at 10:17 AM
facebook twitter linkedin

Having just gotten through the gift-giving holiday season, retail stocks have been in the crosshairs -- with several major names perched near critical technical levels. In today's trading, two apparel retailers are heading in opposite directions amid outlook-related headlines. Specifically, Lululemon Athletica inc. (NASDAQ:LULU) is down 0.5% at $67.93, while Francesca's Holdings Corp (NASDAQ:FRAN) has jumped 10.3% to $19.23.

LULU is getting crushed after the retailer narrowed its fourth-quarter profit and revenue guidance. The shares are now testing their 20-day moving average, which recently served as support. If the stock breaches this trendline, though, things could get bumpy from a contrarian perspective.

After all, hopes are high on Wall Street. During the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 1.28 LULU calls for every put -- a ratio ranking in the bullishly skewed 69th annual percentile. Not to mention, 16 analysts have handed out a "strong buy" rating, versus nine "holds" and a single "strong sell." In other words, Lululemon Athletica inc. could be vulnerable to unwinding positivity among options traders and/or a round of downgrades from the brokerage bunch.

Meanwhile, FRAN is breaking out after the retailer raised its profit outlook based on holiday sales results. The stock is trying to reverse its recent downtrend since topping out at $22.39 on Dec. 9, but its 20-day trendline has so far contained today's upside move.

If FRAN can hurdle that speed bump, bears could be placed on notice. During the past 10 days at the ISE, CBOE, and PHLX, traders have bought to open six times as many puts as calls, albeit amid light absolute volume. What's more, the stock's Schaeffer's put/call open interest ratio (SOIR) rests at an annual high of 6.81, hinting at an extreme put-skew among options in the front three-months' series.

Upgrades and price-target hikes could potentially help Francesca's Holdings Corp, too. Specifically, seven of 11 analysts rate the retail stock a "hold" or a "strong sell." Not to mention, the average 12-month price target for the shares rests at $18, below current levels.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.




These investors are using the market's volatility to their advantage and scoring triple-digit gains on many of their trades.

Even in today's sideways bear market, this trading strategy has continued to provide consistency and profitability to a small group of investors. By using this approach, these traders are removing directional risk and still hitting triple-digit returns. If you want access to this strategy, and lower risk with higher returns sounds good to you, then don't wait another minute.

Join us now to receive our next trades the moment they come out!


Common mistakes options traders make


Special Offers from Schaeffer's Trading Partners